The first alert was sounded by a "sell" note from Shore Capital, which said that the company's £1.75bn debt was a "permanent feature", adding that the recent sale & leaseback and securitisation of the debt-or's book suggested "a company that is not in a comfortable cash position".

Soon, the market was filled with chatter suggesting that Premier would have to turn to its shareholders for emergency funds via a deeply discounted rights issue. The worry, being aired in whispers between traders around the market, was that the company was close to breaching its financial covenants.

Investors, already on edge as companies in the sector come under pressure from rising food price inflation and ever more demanding supermarkets, were thoroughly rattled by the speculation. The company's attempt to stave a sell-off, which took the form of a statement avowing that it was "not in breach of its financial covenants as at December 2007", and clarifying that it was "not contemplating a rights issue", failed to have the desired effect.

As spooked investors exited the stock, Premier Foods' stock lost almost 18 per cent at one point in the afternoon, taking almost £150m off the value of the company. By close, the company's shares, while better off, were still down, depressed by 9.38 per cent, or 11.25p, to 108.75p.

Overall, the FTSE 100 had a volatile day. After gaining about 80 points in the morning, the benchmark index suffered a mid-afternoon slump over worries about a weak opening on Wall Street.

By close, however, the index had recovered to 5784, up 59.90 points. The FTSE 250 was also up yesterday, gaining 43.30 points to 9807.50.

Amongst blue chips, GlaxoSmithKline continued to slide after Thursday's disappointing results, hurting sentiment across the sector. The company was also hurt by Deutsche Bank, which reiterated its "hold" stance on the stock and reduced its price target to 1265p, from 1345p. By the end of the day, GSK's shares had lost 0.74 per cent, or 8p, to 1070p. Sector counterpart Astra-Zeneca was down too, losing 1.62 per cent, or 32p, to 1947p by close.

A negative broker report also depressed Shire Pharmaceuticals. The stock, which was recently buoyed by some bid talk, was hurt by Lehman Brothers, which revised its rating to "under-weight" from "over-weight", cutting its target price to 865p from 1135p. The company's shares closed down 1.94 per cent, or 18.50p, at 937.50p.

The mining sector, depressed in recent days by weak metals prices and fading consolidation hopes after BHP Billiton's bid for Rio Tinto was interrupted by China's Chinaclo, had a better day yesterday. A spike in the metals prices lifted some of the biggest names in the sector, including Kazakhmys, which gained 4.97 per cent, or 59p, to 1247p, and Antofagasta, which gained 6.25 per cent, or 42.50p, to 722.50p.

Others in the sector, including Vedanta, which gained 4.06 per cent, or 74p, to 1896p, and Anglo-American, which gained 3.47 per cent, or 100p, to 2980p, also had a good day. Rio Tinto, for which Sanford Berstein set a price target of 5600p, was up too, gaining 2.11 per cent, or 110p, to 5332p, as did BHP Billiton, which gained 2.18 per cent, or 32p, to 1501p by close.

On AIM, Victoria Oil & Gas gained after Noor Petroleum took a 29.68 per cent stake in the company. Victoria's shares climbed 8.60 per cent, or 2p, to 25.25p.

Roxi Petroleum, on the other hand, continued to slide as the market remained suspicious of margins at both companies.

The company's shares slumped by almost 5 per cent, or 1.50p, to 28.75p by the end of the day.

Regal Petroleum, which has aslo been subject to similar speculation, survived falling into negative territory. The company's shares ended the day flat at 135p.

Investors appeared glad to see two creative directors leave the board of Shed Media, the TV production company. The company's shares closed up 4.51 per cent, or 3p, to 69.50p.

The hazardous waste specialist Augean was excited by the Montagu Private Equity and Global Infrastructure Partners-led consortium's bid for Biffa. By close, the news had taken Augean's shares to 86.50p, up 6.13 per cent, or 5p.

Also on AIM, there was some talk about Weatherly International, an integrated base metals producer, which is believed to be hosting site visits for analysts. While nothing has been reported yet, some in the market expect positive feedback. The hope took the company's shares up 4.92 per cent, or 0.75p, to 16p by close.